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Authorized Economic Operator (AEO) Programme

Customs - CBEC s Customs Manual 2015 - 34 - Chapter 34 1. Introduction: 1.1 The global trading system is vulnerable to terrorist exploitation while the international trade is an essential element for economic development. Customs plays a unique role in providing increased security to the global trade while facilitating the legitimate flow of goods. Thus, in 2005 the World Customs Organisation (WCO) adopted the SAFE Framework of Standards to secure and facilitate global trade, which includes the .....

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developed by the WCO, the Indian Customs administration has developed an AEO Programme that encompasses various players in the international supply chain such as importers, exporters, warehouse owners, Custom House Agents, cargo forwarders and carriers. The objective of the AEO Programme is to provide businesses with an internationally recognized quality mark which will indicate their secure role in the international supply chain and that their Customs procedures are efficient and compliant. An .....

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uthorized by the Customs as an AEO can enjoy benefits flowing from being a more compliant and secure company as well as favourable consideration in any Customs proceedings coupled with better relations with Customs. AEO status will also ensure a low risk score is incorporated into Customs Risk Management System (RMS) and used to determine the frequency of Customs physical and documentary checks. The benefits may also include simplified Customs procedure, declarations, etc. besides faster Customs .....

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the examination of export consignment is governed by Circular No. 6/2002-Cus., dated 23-1- 2002. In cases where normal examination percentage is prescribed as 10%, for AEO exporters this percentage shall be 5%. In cases of export under claim of drawback / Reward Schemes examination percentage for AEO exporters shall be 10% as against 25% fixed vide said Circular. Similarly, in case of examination to sensitive destinations, examination of 20% consignments shall be done as against 50% for other ex .....

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ervice providers shall be given facility of not taking permission on case to case basis in case of transit of goods. In case of international transhipped cargo (Foreign to Foreign), for the pre-sorted containers wherein cargo does not require segregation, ramp to ramp or tail to tail transfer of cargo can be affected without Customs escorts. D. Custodians or Terminal Operators: (a) AEO Custodians shall be given benefits of waiver of bank guarantee under Handling of Cargo in Customs Area Regulati .....

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accorded faster approval for new warehouses. (b) AEO warehouse operator shall be given benefits of reduced bank guarantee to the extent of 5% of the duty liability in respect of individual consignments of sensitive goods to be warehoused. (c) In case of goods not likely to deteriorate, the Chief Commissioner of Customs may grant extension upto a period of six months at a time in deserving cases. 3. Criteria for considering application for grant of AEO status: 3.1 The following criteria is releva .....

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mporters, logistic providers, carriers (airlines etc.), freight forwarders, and Customs House Agents. Others who may qualify include port operators, authorized couriers, stevedores. The list is not exhaustive. 3.3 Businesses that are not involved in Customs related work / activities will not be entitled to apply. Thus, in general banks, insurance companies, consultants and the like categories of businesses will not be eligible for AEO status. 3.4 Only such entities that can categorically establi .....

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gal entity involved in the international trade supply chain and the identified criteria will be applied across all those activities and locations. 3.7 In order to apply for AEO status the applicant must be established in India. For this purpose, the applicant will be asked to provide evidence which may include: (i) A certificate of registration issued by the Registrar of Companies. (ii) Details of where staff is employed for making supplies of goods and/or services. (iii) Proof that the business .....

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nomic Operator (AEO) Status (ii) Security plan (iii) Process map (iv) Site plan (v) Self-Assessment Form 4.2 The application should be sent to the AEO Programme Manager, Directorate General of Inspection, Customs & Central Excise, D Block, I.P. Bhawan, I.P. Estate, New Delhi - 110002. The AEO Programme Manager is supported by AEO Programme Team comprises the officers from the Directorate General of Inspection and its regional offices. 4.3 Each application will be acknowledged and recorded in .....

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responsible person is nominated - This can only be resubmitted when the applicant nominates a responsible person who will be the point of contact for the AEO Programme. (d) Where the applicant is subject to bankruptcy proceedings at the time the application is made: This may be resubmitted when the applicant becomes solvent. (e) Where a previously granted AEO status has been revoked-This may not be resubmitted until three years after the date of revocation. 6. Processing of application: 6.1 On .....

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tion has been accepted, the applicant will be suitably informed of this within 30 days. The application will then be passed to the AEO Programme Team which will by prior appointment visit the applicant s premises and carry out an AEO verification and make a recommendation to the AEO Programme Manager. 7. Rejection of application: 7.1 Applications will be rejected in cases where the applicant is not eligible for grant of AEO status, or has been convicted of a serious criminal offence linked to th .....

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l information. In cases where validation of AEO applications can not be concluded on genuine ground. 9. Legal Compliance: 9.1 An applicant must meet certain conditions and ensure compliance with the criteria of grant of AEO status. Thus, an AEO Programme Team will examine applicant s record of compliance over the last three years preceding the date of applicant s application to ensure adherence to Customs, Central Excise and Service Tax laws as well as allied laws that are administered by the De .....

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extend to the various allied laws that are administered by the Department. These technical or procedural errors may include the following: (i) Any errors that have been voluntarily disclosed; (ii) Any decisions which have been overturned by Courts/Tribunal or departmental review; (iii) Any decisions currently under review; and (iv) Where a penalty is imposed for a minor irregularity. 9.3. The company should have business activities for at least 3 years. 9.4 AEO Programme Manager will assess whet .....

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are identified. 9.6 Once an error has been identified, the applicant is expected to take steps to ensure that they do not happen again or, at least, to ensure that they are immediately remedied if they do arise. Failure to take such steps could count against applicant. 9.7 Besides assessing the compliance of the business itself, the AEO Programme Team may also look at the previous compliance records of (a) Company Directors; (b) Company Secretary; and (c) Employees directly responsible for the i .....

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em may include the following: (i) An accounting system consistent with Generally Accepted Accounting Principles (GAAP) / International Financial Reporting Standards (IFRS) which facilitates audit- based Customs control. (ii) Allowing the AEO Programme Team physical or electronic access to Customs and, where appropriate, transport records. (iii) An administrative set up and documented procedures to control and manage the movement of goods. (iv) Internal controls capable of detecting illegal or ir .....

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of Customs declarations. (ix) Appropriate information technology security to protect against unauthorized intrusion. 11. Financial solvency: 11.1 An applicant must be financially solvent for the three years preceding the date of application. Solvency would generally be defined as good financial standing that is sufficient to fulfil the commitments of the applicant including ability to pay duties. Thus, the applicant should not be listed currently as insolvent, or in liquidation or bankruptcy and .....

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rar of Companies within the time limits laid down by law. (ii) Where applicable, audit qualifications or comments in the annual accounts about the continuation of the business as a going concern. (iii) Any contingent liabilities or provisions. (iv) Net current assets are positive. (v) Net assets position and the extent of intangible assets. 11.3 It is recognized that in some circumstances a company may have negative net assets. For example, a company may be set up by a parent company for researc .....

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rds and information. This will include the latest: (i) Cash flow figures (ii) Balance sheet. (iii) Profit and loss forecasts approved by directors/partners/sole proprietor. 12. Safety and security: 12.1 Internal controls and measures to secure the safety of applicant s business and his supply chain will be considered in addition to any specific legal requirements that may be applicable to the business. 12.2 In order to satisfy the requirements of AEO status, the applicant will need to ensure sec .....

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ignments / courier consignments any international seal compatible with standards of PAS / ISO 17712 shall be used. However in case of maritime containerized cargo only PAS / ISO 17712 seals shall be used. (d) The integrity of container seals should be checked and appropriate procedure should exist for the fixing of seals. (e) Only designated personnel should distribute container seals and safeguard their appropriate and legitimate use. (e) When appropriate to the type of cargo container used, a .....

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ocuments, purchase/sales orders and Customs papers. (j) Internal control procedures should exist when discrepancies and/or irregularities are discovered. 12.4 Procedural Security:- In order to ensure procedural security following measures / steps should be taken. (i) Security measures should be in place to ensure the integrity and security of processes relevant to the transportation, handling, and storage of cargo in the supply chain. (ii) Proper documentation management procedure should be in p .....

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lading. (b) The weights, labels, marks and piece count of the import/export cargo are accurately indicated. (c) Import/export cargo are verified against purchase/delivery orders. (d) Drivers delivering or receiving cargo are positively identified before cargo is received or released. (e) All shortages, overages, and other significant discrepancies or anomalies must be resolved and/or investigated appropriately. 12.5 Conveyance Security: For conveyance security the applicant seeking authorisation .....

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ramme Team and Customs, as well as to maintain records of these reports, which should be available to Customs. (d) ensure that potential places of concealment of illegal goods on conveyances and ensure these are regularly inspected, (e) ensure that transporters make sure that conveyance integrity is maintained while the conveyance is en route transporting cargo to export/import points or import/transit containers by utilizing a tracking and monitoring activity log or records. (f) ensure that pre .....

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onveyance tracking and monitoring procedures are being followed and enforced. 12.6 Premises Security: In order to ensure premises security following measures steps should be taken. (a) Buildings must be secure against unlawful entry. (b) External and internal windows, gates and fences must be secured with locking devices or alternative access monitoring or control measures. (c) Management or security personnel must control the issuance of locks and keys. (d) Adequate internal and external lighti .....

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rage areas may be restricted. (h) There should be appropriate security systems for theft and/or access control. (i) Restricted areas should be clearly identified. (j) integrity of structures and systems must be periodically inspected. (k) Perimeter fencing should enclose the areas around cargo handling and storage facilities. (l) Interior fencing within a cargo handling structure should be used to segregate domestic, international, high value and hazardous cargo. (m) All fencing must be regularl .....

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er criminal offences. (b)Periodic background checks must be conducted on employees working in security sensitive positions. (c) Employee identification procedures should require all employees to carry proper identification that uniquely identifies the employee and organisation. (d) Procedures to identify, record and deal with unauthorized or unidentified persons, such as photo identification and sign-in registers for visitors etc. must be ensured at all points of entry. (e) Procedures must be in .....

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n of business partners. (ii) For those business partners having AEO certification, the applicant must get those business partners copies of certification. (iii) For non-AEO partners, the applicant must get written confirmation of meeting AEO equivalent security criteria. Such business partners must have one of the following written documents demonstrating their compliance with security criteria: (a) Contractual document (b) A completed self-assessment security questionnaire from the applicant. ( .....

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licant. 12.9 Security Training and Threat Awareness:- The following measures are relevant for ensuring business partner security: (i) The applicant should ensure that: (a) A threat awareness program is established and maintained for employees to foster awareness of the threat at each point in the supply chain. (b) Employees are aware of the procedures the company has in place to address a situation and how to report it. (c) Specific training is offered to assist employees in maintaining cargo in .....

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ecurity training and keeping records of security training for the checks conducted by the Customs are established. 13. Pre-certification verification: 13.1. Once the application is accepted and validated by the AEO Programme Manager, within 15 days thereof it will be sent to an AEO Programme Team under intimation to the applicant, for carrying out a pre-certification audit. 13.2. The AEO Programme Team will visit the business premises and carry out checks to verify the information provided is ac .....

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ons or provide additional information on all aspect of the application to the visiting AEO Programme Team. 13.6. Where appropriate, in addition to the other requirements detailed earlier, the AEO Programme Team will cover the following: (i) Information on Customs matters. (ii) Remedial action taken on previous Customs errors, if any. (iii) Accounting and logistic systems. (iv) Internal controls and procedures. (v) Flow of cargo. (vi) Use of Customs House Agents. (vii) Security of Computers/IT an .....

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standard systems of record keeping and security etc. there will be no need for the AEO Programme Team to audit all of them. However, if the business of the applicant covers a range of activities or different sites have different method of operating, then it may be necessary for more visits to be made. 13.9 The duration of visit/verification would depend on the size of business, number of sites, how they operate etc. The AEO Programme Team will give the applicant an estimate of time required, th .....

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sed of the criteria that have not been met and give the applicant time to adapt procedures to remedy the deficiency. If applicant is unable to make the required changes within the specified time limits, the AEO Programme Manager will issue a decision to reject applicant s AEO application, explaining the reasons for rejection. This decision will be subject to the applicant s right of appeal. 13.12 In exceptional cases, the AEO audit verification may be stopped by consensus between the applicant a .....

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done within 90 days of the date on acceptance of the completed application. The period during which the AEO verification is stopped does not count towards the 90 days limit within which the AEO Programme Manager must give the applicant a decision on his application. 14.2. If AEO status is granted, the AEO Programme Manager shall send the Certificate of AEO Status to the applicant in hard copy along with an electronic copy. The Certificate shall bear the AEO logo that may be used where it is appr .....

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is highly recommended that the applicant should keep the Certificate of AEO status at a safe place and not release the Certificate number to anyone unless required to do so for business purposes. Although the AEO status can be advertised by the applicant, the Certificate number should not be part of their advertisement. 14.5. The validity of certificate of AEO status shall be for 5 years or as extended by DGICCE. 15. Maintaining AEO Status: 15.1. After obtaining AEO status, the AEO status holde .....

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hanges to the senior personnel responsible for Customs matters. (vi) Addition or deletion of locations or branches involved in international supply chain. 15.3 The AEO status holder should notify the AEO Programme Team as soon as the change is known or, at least within 14 days of the change taking place. 15.4. If the legal entity changes, the AEO status holder needs to reapply for AEO in the name of new legal entity. 15.5. If the AEO status holder makes Customs related errors, they must be repor .....

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that the AEO status holder should continue to re-assess it s compliance with the conditions of certification and act upon any identified problems as soon as they arise. To begin with, the frequency of such review will be one year. 17. Suspension of AEO Status: 17.1 The AEO Programme Manager may suspend the Certificate of AEO Status in the following cases: (a) Where there is a reasonable belief that an act has been perpetrated that is liable to lead to prosecution and /or is linked to a serious i .....

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is authorization be suspended in case he has detected some irregularities and needs some time to correct the situation. In this case, if necessary, this time period can be extended provided that the AEO Programme Team is satisfied that the difficulties cannot be resolved within a reasonable time. 17.4 When the AEO Programme Team is satisfied that the problems affecting certification have been satisfactorily resolved, it will make suitable recommendation to the AEO Programme Manager who will with .....

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